Traditional lifetime retirement income sources such as social security and pensions are playing an increasingly smaller role in modern retirement income planning and strategies. As the level of benefits provided under once robust pensions plans dwindle and the stability of the social security system itself is questioned, other sources of retirement income have become increasingly more important. Furthermore, coupled with longer lifespans, continued inflation and financial markets volatility, retirement poses many challenges for current generations. An increasing concern of many retirees (and those approaching retirement) is the possibility of outliving one's assets.
Guaranteed income annuities can overcome many of these retirement challenges and provide security and certainty for individuals. By providing lifetime or period certain streams of guaranteed income, (or a combination of both these income annuities can meet many post retirement income needs and assure retirees of guaranteed income to support their lifestyles. Current variations of guaranteed income annuities are offered as either a separate immediate annuity or as a separate deferred annuity. Immediate annuities have periodic annuity payments that begin within one year of the purchase date of the annuity contract. In contrast, deferred annuities have payments that begin more than 12 months after purchase of the annuity contract, and in one manifestation (longevity insurance which defers payouts to an age at or around life expectancy) can provide a useful backstop to the investment strategy of a retiree
Currently, in order to compare the relative benefits of an immediate to that of a deferred annuity, an agent would have to view illustrations from two separate and distinct annuity products. This is primarily due to the fact that conventional deferred annuities must meet complex state insurance laws and special distribution requirements given the delayed aspect of the payout stream. These stringent requirements are similar to other accumulation-type annuities with account balances that have not been annuitized, e.g., variable annuities which offer a variety of mutual fund and equity investment accounts (which only allow annuitization to begin at the time of election), fixed annuities and modified guaranteed annuities. On the other hand, immediate payout annuities are exempt from both the state insurance nonforfeiture laws and the distribution ownership limitations. Such disparate regulatory treatment has made these types of annuities difficult for consumers to compare, contrast and actually benefit from since each has to be modeled and purchased separately.
Accordingly, it would be desirable to have a system which could offer and administer a guaranteed income product with both the benefits of both immediate and deferred annuities as well as offering consumer greater flexibility with respect to the payments to be made and permitting the insurance agent to easily provide a potential consumer with a broad range of income annuity options in a concise manner of comparison.